Cash it may be king when it comes to real estate but are there times where you might want to get a mortgage instead?

The real estate industry is quite volatile right now; home prices are up, inventory is down, and rates are slowly creeping upwards. Buyers might be scrambling to find a home, and even then they may be entering a bidding war.

Cash doesn’t always win in a bidding war, though. Terms, dates, and timelines can also drastically affect a seller’s decision on whether or not to accept an offer. A buyer might be offering cash, but if the terms do not fit into the seller’s timeline, a financed offer might be much better.

If you have cash to buy a house, you want to consider all the different costs, interest rates and pros and cons when it comes to the purchase of a home all-cash. It can make it much more attractive to sellers, especially in a competitive market but everything else has to line up for the seller as well.

We’ve had buyers that are well financed and put down a hefty down payment and have won one out in a bidding war against all-cash. Again, there are a lot of different factors involved. The financed offer promise to close within 25 days, our buyers had a substantial down payment and earnest money deposit, and there were no contingencies, and they even waived the home inspection. All that is very attractive to the seller, and of course, the seller still gets the full offer price.

Now, if the buyer had come with a financed offer contingent on the sale of another property, a two or three-month closing date, and strict contingencies as to home inspections and other items, a cash offer weaving all of those other details is much more attractive.

A cash offer may also allow the homeowner to sell the house more easily or even at a loss, regardless of market conditions. This is something that the seller should discuss with their listing agent before moving forward on a lowball cash offer. Cash offers can be a lot less than a financed offer but provide better terms that may be more attractive.

Obtaining financing can have significant benefits to a buyer. If they have a lot of cash and could pay outright, they may not want to tie up all that money in a real estate purchase. If you go with a mortgage, you can give yourself some flexibility with the money you do have.

Paying in cash also has tax implications. Mortgage interest payments are tax-deductible, which is very attractive to finance offers. This might be an advantageous way to finance the house due to the reduced tax obligation. It can also protect your money. If you use all cash to buy a house, then all of that liquid cash is wrapped up into a real estate purchase. You may not be able to turn around and sell it whereas if you are financing, someone else’s money is tied up and you can hang onto it a little bit longer before selling.

One thing is for certain if you decide to finance the purchase of the house you want to make sure that you can easily afford the principal payment, interest, homeowners insurance, property taxes and any other fees that may be tacked on to your monthly housing expense such as homeowners association fees or mortgage insurance. Talk to your real estate agent and your lender about the best options for the type of home you want to buy, especially if you have both cash and financing options on the table.

What our clients say

Jessica Lowery

I love working with Karen and Frank. They are honest, not pushy, and have your best interest in mind. They...

2015-05-12T20:51:52+00:00

I love working with Karen and Frank. They are honest, not pushy, and have your best interest in mind. They will also make you laugh! :) Love these two!!!

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Steve & Jean DeVito

“The Bakers treated us like family during our whirlwind weekend of looking at houses. Prior to our on-site visit to...

2015-03-16T20:17:46+00:00

“The Bakers treated us like family during our whirlwind weekend of looking at houses. Prior to our on-site visit to Sunset Beach they created a portal and populated it with properties that met our ever-evolving criteria. By time we arrived we had a good feel for what we could afford and what was available that met our criteria. The Bakers, especially Karen, were able to make sense of what we thought we were looking for and eventually matched us with a house that we ended up purchasing — Karen called it the “This is it” house and she was right. We are loving our 2nd home and appreciate how painless Karen and Frank made the process. All the paperwork was done seamlessly and quickly and the closing went off without a hitch. The Bakers do not believe in the hard sell — they gave us the knowledge we needed and the guidance we needed to make our dream a reality.”

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Matt & Amy Carver

Amy and I have bought and sold four properties in the past twelve years. Both of you are the best...

2015-03-16T20:18:22+00:00

Amy and I have bought and sold four properties in the past twelve years. Both of you are the best realtors we have ever dealt with. Amy and I both felt we could trust you to look out for our interest. The level of service you provided was outstanding, from taking the trash out, helping the buyer with inspecting the irrigation system, dealing with our tenants, always being there if we needed to ask a question, providing constant updates on the market and always keeping us informed on the sale of our house. I think your next venture should be training other realtors, because both of you have mastered the art of providing excellent service. I will be sure to recommend the Frank and Karen team to anybody looking for a trust worthy, knowledgeable and top performing realtor. It was a pleasure working with both of you.”

http://sunsetbeachandbeyond.com/testimonials/matt-amy-carver/

Ernie & Carol G.

“Karen & Frank Baker are the best. They are very knowledgeable with the area & showed us many homes. When...

2015-03-16T20:18:50+00:00

“Karen & Frank Baker are the best. They are very knowledgeable with the area & showed us many homes. When we made up our minds which one we wanted, they got us the best deal on it. We were very satisfided with them. After the purchased was made & we moved in, they were still there to answer any questions or problems that we might of had. Like I said, they are the BEST.”

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Dave & Rose

“Thanks again for all the time you spent with us, As overwhelming as it was, you two made it fun”

2015-03-16T20:19:23+00:00

“Thanks again for all the time you spent with us, As overwhelming as it was, you two made it fun”